Fundamentals are strengthening across several office markets in the Americas, Asia Pacific, and Europe as we approach into 2015, according to Cushman & Wakefield's newly issued 2015-2016 Global Office Forecast. Apartments near me
"From a worldwide perspective, 2014 was a healthier year for the office real estate sector, with many markets entering 2015 on good footing," Maria T. Sicola, head of Cushman & Wakefield's Americas Research group, said. "Of course, some markets in or near areas of political unrest and those with stagnant economic growth continue to struggle, but overall, things are better than they were a year ago."
THE AMERICAS AND THE UNITED STATES
U.S. cities are enjoying economic expansion, even beyond those driven by the solid technology and energy industries, which is translating into strong office market fundamentals. "Demand is increasing, particularly for freshly developed or restored space," Sicola added. "While rental growth has slowed in some regions, more than 80% of the study's areas will see rent increase that outpaces inflation."
The changing workforce is a major driver of the office market recovery in the United States. "The millennial generation is influencing where they want to work," Sicola explained. "With stronger fundamentals, Atlanta, Chicago, and Dallas have entered the ranks of San Francisco, Seattle, Boston, New York, and Houston in terms of leasing velocity."
The Canadian office market is also showing signs of improvement. Strong demand is ushering in a new age of expansion in Toronto, with 5.1 million square feet of new space set to open by 2017. The Deloitte Tower will be built in Montreal, and fresh supply will be available in both Calgary and Vancouver. In most Canadian markets, consolidation and densification are the norm, but the flight to quality is causing vacancies in some older office stock.
Due in part to energy reforms and secondary laws established by Congress, which have opened the country up to increasing foreign investment, Mexico City has risen to become the star of the Latin American office market. While GDP growth in 2014 fell short of predictions, significant growth is expected in the next years.
South American markets, on the other hand, are falling behind, particularly in Argentina and Brazil, where both production and demand have slowed. While Chile's Santiago office market has been ahead of the curve, recent trends have brought it in line with other markets, which will not fully recover until 2017.
PACIFIC ASIA
In terms of economic growth and stability, Japan and India are among Asia's best performers. Strong corporate earnings are driving office market demand in Tokyo, while information technology-related tenants continue to dominate the environment in India. Singapore, along with the Philippines, is benefiting from the digital boom since it is the next stop for multinationals after India.
Rental growth in established markets will be strongest in Tokyo and Singapore, as expected, while several emerging countries will have above-average growth. Rents will climb moderately or remain constant over much of China.
"While the Asia Pacific economies' slow development resulted in a sluggish leasing environment in 2014, business is expected to pick up next year," Sicola said. "With the exception of cities in Australia and several emerging markets in China and India, most core markets will have very low vacancies in 2015 and 2016."
EUROPE
While economic conditions in Europe are still unsettled, a rebound is beginning to emerge. "The future looks better than it has in a long time," Sicola remarked. "Overall, leading indications such as rental growth, supply levels, and demand are all good."
Rental growth is expected in seventeen of the twenty-one cities studied. Dublin and London, the two front-runners, are experiencing supply-driven recoveries. Dublin is expected to grow at a compound annual rate of 5.7 percent from 2014 to 2016, despite just having one project in the pipeline. The development pipeline in London will be constrained over the next two years due to below-average completions and pre-letting, which is absorbing future supply.
With a few exceptions, Europe's Class A downtown office markets are expected to increase at a decent rate through 2016. However, given the persistent trends of densification and flight to quality, older office stock will suffer the price.